NEW YORK ( TheStreet) -- Stocks recoiled by the end of the trading session Tuesday after Federal Reserve policymakers stood pat, giving no indication that another round of quantitative easing is on the way anytime soon.

A lackluster read on retail sales in November and disappointing comments from German Chancellor Angela Merkel also put a damper on sentiment.

The Fed decided to leave rates unchanged amid signs suggesting that "the economy has been expanding moderately, notwithstanding some apparent slowing in global growth." Voting against the action was Chicago Federal Reserve President Charles Evans, who supported additional policy accommodation.

But the central bank warned that the unemployment rate remains elevated despite indications of some improvement in the labor market.

Stocks were also being pressured by disappointing remarks by Germany's Merkel, who according to Reuters rejected a bigger European Stability Mechanism bailout fund. The ESM, which currently has a lending capacity of €500 billion, is expected to replace the current bailout fund and be up and running in mid-2012. The euro was plummeting after the report.

The market was also reacting to disappointing U.S. retail sales figures, although stock futures showed little reaction when the report was released before the open. The Commerce Department said sales rose 0.2% in November. Economics had expected a significant boost from Black Friday sales, forecasting a 0.6% rise, according to Thomson One Analytics.

Also, optimism at small U.S. businesses rose in December, according to an index by the National Federation of Independent Business. The index, which has improved for three straight months, rose to 92 from 90.2 in the prior month. Economists say the reading is still at historic lows but note that the rise may signal job creation in December.

Investors remain wary that the market could swing unpredictably on European headlines. "The car is stuck in the mud with its wheels spinning. It's throwing up a lot of mud but not going anywhere," said Tim Hoyle, director of research with wealth management firm Haverford Investments, explaining that trading risk is exceptionally high. "We recommend that investors get in the car, stay clean and not try to push it one way or the other, that is, don't get involved in the daily trading."

Worries are growing that credit rating agencies may downgrade the sovereign debt of European nations. Hoyle said that investors are anticipating a review from Standard & Poor's as early as Tuesday or someday this week. The ratings firm put a swath of European countries on negative credit watch last week, saying it would conclude its own review after Friday's European Union summit.

Echoing S&P's warning, Moody's Investors Services said Monday that talks among European leaders last week yielded little new measures to help resolve the debt crisis. Fitch Ratings said no comprehensive solution has emerged and predicted a "significant economic downturn" in the eurozone.

January oil futures rose $2.37 to close at $100.14 a barrel, and February gold futures fell $5.10 to settle at $1,663.10 an ounce as the metal retracted with the euro on news that Merkel rejected raising Europe's bailout fund cap.

The benchmark 10-year Treasury was up 15/32, diluting the yield to 1.963%, and the U.S. dollar was up 1% against a basket of currencies.

In corporate news, shares of Jive Software ( JIVE ) shot up 25% to $15.03 Tuesday during the business software company's first day of trading on the Nasdaq as strong investor interest in the social media sector continues.

Best Buy ( BBY), the consumer electronics retailer, confirmed its fiscal-year adjusted diluted earnings per share guidance range of $3.35 to $3.65 after posting fiscal third-quarter profit of 47 cents a share on revenue of $12.10 billion. Analysts were expecting earnings of 51 cents a share on revenue of $12.14 billion. The company reported domestic comparable-store sales growth of almost 1%. Shares dropped 15.5% to $23.73.

Apparel retailer Urban Outfitters ( URBN) announced in a regulatory filing that its retail same-store sales were up in the mid-single digits so far in the fourth quarter. Shares jumped 5.3% to $27.87.

Southwest Airlines ( LUV) will become the launch customer for the new Boeing ( BA) 737 MAX, the companies said Tuesday.

The carrier became the first customer to place firm orders for the new aircraft, with the first delivery slated for 2017. The order is for 150 aircraft. Boeing shares were flat at $70.90.

AT&T ( T) is considering ways to restructure its proposed $39 billion acquisition of T-Mobile USA after a judge set a Jan. 18 hearing about the future of the merger. The Justice Department opposes the deal that brings together the No. 2 and No. 4 wireless companies in the U.S. because of antitrust concerns. Most analysts believe the deal is dead. AT&T shares were up 0.1% to $29.04.

-- Written by Andrea Tse and Chao Deng in New York.

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